Struggling with your mortgage? You could be entitled to compensation

What to do if you have been a victim of mortgage mis-selling

By Elliot Wright, 29th June 2010

The new coalition government could prove to be quite a blessing for consumers after Chancellor George Osborne outlined plans to put the unethical behaviour of bankers firmly back in the harsh glare of the regulatory spotlight.

Under fresh proposals, a professional body will be set up to monitor the morals of the banking industry with the intention of putting the emphasis on customer care rather than the pursuance of a quick profit.

Those who do not adhere to set professional and ethical standards could find themselves "struck off" in a system similar to the General Medical Council.

Such measures will, we hope, improve the reputation of the wretched banking industry, which as well shouldering the blame for the global financial crisis, has found itself on the end of barrages of criticism and fines for various mis-selling scandals.

One of the biggest mis-selling stories of recent times has been that of mortgages. And although the government intends to crackdown on the practice of negligent and irresponsible mortgage selling, scores of people have already found themselves victim to the scandal.

It is estimated that hundreds of thousands of mortgages have been mis-sold to homeowners in the UK as a result of greedy brokers and banks more interested in raking in commission and juicy interest than whether their mortgage products were actually suitable for the customers or not.

As a consequence, many unfortunate homeowners face repossession and endless days of worry of whether they will be able to put a roof over their heads or not.

There are myriad reasons why a mortgage might be mis-sold to a customer, such as:

• The borrower was not adequately assessed to see if they could afford the monthly payments.
• The borrower was on benefits when sold the mortgage.
• The broker encouraged the borrower to falsify details, such as income, in order for the application to be approved.
• The broker failed to explain to the borrower what would happen to their mortgage should interest rates go up.
• The broker advised the borrower to apply for a self-certification mortgage despite not being self-employed.
• The mortgage would run past retirement age and changes in income were not taken into account.
• The broker demanded a separate fee which was a percentage of the mortgage.

By all accounts and purposes, if the borrower was misled or misadvised in any way by the broker it could be the case that the mortgage was mis-sold to them.

If it's obvious that the borrower had no realistic chance of ever being able to keep up their monthly payments, then there is a very strong case for mis-selling.

The regulations are clear on mortgage mis-selling, under section 4.7 of the 'Mortgage and Home Finance: Conduct of Business' (MCOB) - the Financial Service's Authority rulebook that all mortgage advisers must adhere to - it states that mortgage advice must be "suitable for that customer" and that advisers "must make and retain a record" of it being suitable.

Any advisers that breach the MCOB rules are "actionable at the suit of a private person who suffers loss as a result", meaning they can claim redress from them should they act unlawfully or negligently.

What you can do if you have been mis-sold a mortgage

The first course of action to take if you have been a victim of mortgage mis-selling is to complain directly to the broker - be it an intermediary, an IFA, or a bank - who advised you.

As was said previously, brokers are legally required by the FSA to retain a record of the mortgage being suitable for you. They must be able to prove that all procedures were followed and that they advised you correctly, and if they cannot, your mis-sold mortgage claim will have a lot of traction.

To request this proof from the broker, write them a letter quoting section 4.7 of the MCOB, which can be found here (there is no need to quote the whole passage, just the name should suffice as the broker will know what you are referring to,) and ask them to supply copies of the advice given to you as well as evidence of a full income/expenditure assessment or fact find into your suitability for the mortgage.

It was the broker's job to inform you of exactly what you would be paying and to tell you if you could realistically afford the mortgage or not. If they did not do this then you will have strong grounds for a claim.

If you are certain that it was the broker's bad advice that left you burdened with an unaffordable and inappropriate mortgage then make an official complain in writing, making sure to include the following details:

• How your mortgage was mis-sold and how the broker's advice was misleading.
• What situation this has left you in (e.g. arrears, risk of repossession).
• What you would like for the broker to do to remedy the situation e.g. end the mortgage and facilitate a move to a more suitable mortgage while compensating you for the extra costs, refund all arrears fees.
• Threaten them with further legal action if their response is unsatisfactory

If the broker rejects your complaint and denies any allegation of mis-selling, do not give up as you will be able to escalate your complaint further to a regulatory body for an independent and impartial review.

The aforementioned Financial Services Authority deals with consumer complaints against financial institutions through its Financial Ombudsman Service (FOS). You may have read recently that the coalition government plans to disband the FSA however this will not happen until 2012 at the earliest, so there is still time for you to contact them.

Claims Financial